PRIVATE EQUITY IN INDIA AND SOUTHEAST ASIA.

Profile of the author : Antish Rathore is a third year student of B.A. LL. B. (Hons.) from Alliance University, Bengaluru. Her areas of interest include Public Administration and International Law.

INTRODUCTION-

Since 1991 reforms have been on a growth trajectory and a number of other advanced steps are taken altogether fields like Banking, Legal Policy, Finance, Investment Policies, etc. Capital plays the most significant role in a company. The sources of such capital are manifold, depending on the short-term as well as long-term needs. One of the foremost preferred mediums for capital growth, usually for personal unlisted companies are Private Equity funds. The Private Equity industry in India has developed over 20 years. The industry has evolved over time to a level that attracts global investors. In simple words, private equity refers to an alternate investment of capital into a business. It is a sort of financing, whereby the capital is invested by private investors, like funds and investors who directly invest and have interaction with public companies [1].

Private equity funds in India are set up as trusts and registered as alternative investment funds under the Securities and Exchange Board of India, Regulations, 2012. Apart from trusts, private equity funds are often found out as companies and indebtedness partnership.

Throughout the last decade the emerging markets have become increasingly popular destinations for many investors. the South East Asia countries has been growing rapidly. According to a December 2012 report published by the Boston Consulting Group – ‘Private equity in South East Asia: increasing success, rising competition’ – the region has now become a genuine hotspot for investors.

DEFINITION OF PRIVATE EQUITY-

The first question arises why this is “private equity”? Private because these are funds that are mainly interested in acquiring private companies that have not been listed on a stock exchange and equity because private equity funds are exclusively focused on equity investment. Most private equity firms specialize in deals with a specific type of target based on the life cycle stage of these targets. Some Pease are interested in young firms with high growth prospective and a promising management team while others are focused on established companies with stable cash flows.

FUNDRAISING AND TAX RELATED SERVICES -

During the fundraising, a lot of things need to be completed. Private Equity firms help private companies in checking out the whole strategy. They help the team to develop the fund investment strategy. Along with that, private equity firms help companies with deal opportunity and analyze the market, the expected value proposition of the fund, and also with doing the due diligence of clients. Moreover, private equity firms also will help private companies write key components of the clients’ track record. Private equity in India can only manage the funds once they have a whole grasp on the tax and regulatory services. They offer tax & regulatory services as well to the companies who need them. Under this service, they facilitate private companies in fund structuring, restructuring for optimizing the tax.

SCENARIO OF PRIVATE EQUITY FUNDS IN INDIAN MARKET-

India is one of the fastest growing economies in the world. According to the predictions of the experts, India will become the third largest economy in the world in the next one decade by 2030. In this scenario India will require more private funding because of the high growth of the private funds and also the government supports privatization. There will be many private firms, which will be coming in the market and they will be requiring funding and private equity indeed can play a very important role. Also, it has played a major role in the past two decades if we analyze the data. There are many reasons in India for the increase of the private equity funding specially from the global investors. The major two reasons are-

• India offers very high growth.
• Secondly, there is a huge reform in the foreign direct investment policy in India.

These are the main reasons India has received so much of the private equity funding from the both global body and local body. There are many companies in India who received private equity funds. For example, we can see that Flipkart has received the private equity funding of almost 2.5 billion dollars. Also, we can take Ola cars, which has received the private equity fund of 1.1 billion dollars.

Private equity funds are not only invested in the growth stage of a company but also invested in start-up plans. According to a report private equity funds of 3.5 billion dollars invested in start-up plans in the year 2017. Mainly private equity funds used for healthcare companies, technology industries and financial services and infrastructures. These companies are the top priorities for the private equity funds in India.

Private equity funds are set to invest in a bunch of companies. If some companies will make losses then also the private equity firms compensate that loss from the other companies which gain profit. Few companies may not be able to take off but few will substantiate for the loss made by other companies. which will be helpful for the private equity firms[2]. Some of the major private equity firms in India are-

• Matrix partner
• Blackstone
• Carlyle group
• Ten cent

These are the major companies in India who give the private equity funds for investments.

SCENARIO OF PRIVATE EQUITY FUNDS IN SOUTHEAST-ASIA

As South-East Asian economies have blossomed exponentially in recent years, government control over certain service sectors has been relaxed. Ownership legislation surrounding the healthcare and education sectors especially has been reformed. Such things have created opportunities in a number of Southeast Asian nations, including Thailand, Malaysia and Vietnam.

Malaysia has also been expanding its public equity sector, while other countries like Myanmar, are implementing policies designed to hold out broad social, political and economic reforms. These reforms are intended to inaugurate a replacement age of democracy, also as a free and open free enterprise. During this sort of environment, the chances for Public equity firms which will demonstrate patience and foresight are almost limitless.

One of the key driving forces behind the prosperity of the South East Asian region is the plethora of natural resources within the area. There has been demand for the region’s oil and gas, palm oil, minerals. The exploitation of this overabundance has not only increased wealth within the region, but has also fuelled the expansion of associated industries like oil services, logistics and transport.

As the South East Asian region continues to grow there will be ample opportunity for Private equity firms to continue to invest. The continued expansion of the consuming middle classes, the region’s political and economic liberalization and sustained growth will lure the biggest players in global investment.

CONCLUSION-

Private equity funds play a crucial role in promoting entrepreneurship and economic processes. In exchange, these investors take up positions and shares in the companies they invest in. However, within the Indian context, these funds usually consider taking over a minority stake thanks to the concentration of shareholding within the hands of the founder. I would like to add that private equity funds are very good to invest in India because India is a populated and a developing country. Also, Indian government encourages the private sector. Also, I would like to say that southeast Asian countries are also adapting these private equity policies because they also support the privatization.

[1] Business tips, published on September 27,2019 [https://www.finsmes.com/2019/09/getting-into-private-equity.html] accessed on 8th November 2020

[2] List of private equity companies by Priyanka Prajapati [https://www.thewallstreetschool.com/blog/list-of-private-equity-companies-funds-india/] accessed on 8th November 2020

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